Oil puts Canada on the chessboard between China and U.S.: Prentice

Canada’s energy resources will play a role in a global chess game between the United States and China, former environment minister Jim Prentice said Monday.

Though sparse on details, Prentice said he believes Canadian energy export diversification will have an effect on our current sole customer — the United States — especially if relations between it and China sour.

“While the United States has been clear in encouraging Canada to pursue diversify markets, we would be naïve to think that a blossoming of the relationship between Canada and China would not have implications of some sort in terms of our relationship with the United States,” said Prentice, speaking at the Canadian American Business Council’s fall conference in Ottawa Monday.

“Welcome to the global chessboard — which all of this entails,” he said.

Earlier in the day, U.S. ambassador to Canada David Jacobson put out a more positive message at the conference, saying “the implication for the United States of Canada’s desire to increase its trade with Asia in general and China in particular — and I want to say this as clearly as I can — is good for the United States of America.”

Prentice, speaking on the same stage about an hour later, brought up the “delicacy of this relationship amongst Canada, the United States and China.”

While ties between Canada and China have been strengthening in recent years, “China’s relationship with the United States has actually deteriorated markedly over the past five years,” said Prentice, who is now a senior executive vice president and vice chairman at CIBC.

“As things develop in the future, we need to be mindful that we have a relationship with the United States, we will also have a very strong relationship with China and with other countries in the Asia-Pacific, so what the future holds for Canada is our emergence on the global playing field in terms of trade, in terms of energy,” he said.

In other words, Canada is not feeling the brunt of playing one world power against the other yet — but it’s something to keep in mind.

Until that point, simply having resources doesn’t make Canada an energy superpower, said Prentice. What it needs is more customers, he said.

Efforts to ship Alberta’s bitumen to the Asia-Pacific through British Columbia using the Northern Gateway pipeline are currently under regulatory review. The controversial takeover of Nexen by Chinese state-owned oil company CNOOC remains stuck on the federal industry minister’s desk as he mulls approval. Meanwhile, the United States still hasn’t made the call on whether to approve the Keystone XL pipeline.

Prentice’s point seemed to be not that our geopolitical relationships are under any immediate threat, but that given the highly-contested files currently being sorted out, it’s important to imagine the new economic world for which Canada has set itself up.

“These are the two markets that are going to be central to our prosperity in the days ahead,” said Prentice.

He seemed to allude to Canada’s less-than-smooth handling of the above-mentioned projects in his speech.

The global energy game is “one we are forced into and one frankly we are not playing with sufficient skill, foresight or cohesiveness and, in particular, as a country we have not been of one voice,” said Prentice.

Monday’s conference was a chance for top American and Canadian businesspeople and diplomats to meet and listen to the bigwigs in the bilateral relationship, notably Prime Minister Stephen Harper.

While Keystone XL was on everyone’s lips, there were few insights from speakers on whether the pipeline will be approved — first by the state of Nebraska and then by U.S. President Barack Obama — in the coming months.

Obama will be focused on domestic issues over the next few years, “however, the Canada-U.S. energy relationship will likely emerge as a priority only to the extent that it ties directly into President Obama’s domestic agenda,” said Prentice.

There “has been something of a disconnect” on energy between Canada and the U.S. despite the harmonization of motor vehicles consumption standards, said Prentice. “But we’ve also watched as low-carbon fuel standards have proliferated in the United States in an attempt to exclude Canadian oilsands oil in the market.”

The U.S. is also ratcheting up domestic oil production, shrinking market potential for Canada.

“As President Obama’s second term begins, we cannot evolve into believing that our interests and the interests of the United States on energy will ever be completely identical,” he said. “If the Americans are pursuing diversity of supply — clearly they are — that means that we must pursue a policy of diversity of demand.”

On China, which Prentice said he visits often, the 18th congress of the ruling Communist party did not reveal any significant new policy directions, something iPolitics reported on last week here.

“The signs from Beijing so far suggest an approach that is weighted more to the status quo than an aggressive agenda,” said Prentice.

And with Canada’s urgent need to find new energy customers, Prentice pointed out that emerging economies have other options for buying energy.

“We are in fact one the highest cost producers of oil and natural gas, oil in particular, around the world,” he said. “Our strength and our competitive advantage does not lie in being cheap, because we’re not.

“Our strength, our competitive advantage, is that we are dependable, reliable, we are secure.”